Imposition of penalty u/s 271(1)(c)

This query is : Resolved

CA Shraddha Vora (Querist)
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13 August 2013 Query on Addition made by AO under scrutiny 143(2), which is offered by assessee to buy peace of Mind
Assessee is engaged in the Business Custom House Agent (CHA) and deriving income as Agency Commission. The Modus Operandi of the assessee is that it makes payment on behalf of client to clear the goods of the client and these payments are reimbursed by the client by issuing the debit Notes. Assessee charges Commission for this service which is its income.
From this modus operandi assessee claims two types of reimbursements from its client i.e. One for which assessee have the supporting and other part of which assessee did not have the supporting. The other parts of reimbursement are purely cash expenditure having only self-made vouchers and no other supporting.
During scrutiny proceedings AO asked to submit the Debit notes issued to client and he found that other part of payments did not have supporting. Further AO asked why this reimbursement payment did not have any the supporting’s?
In reply to this assessee explained the modus operandi as stated above and to buy peace of mind offered some percentage of cash expenditure which is made on behalf of client for addition. Now AO is of the view to impose the penalty on these additions u/s 271(1)(C) of the IT Act.

Kindly reply, is there any way to get the relief from the penalty imposition on the addition which is offered by the assessee to buy peace of mind? Kindly suggest if any judicial pronouncement in support of the same line of business???

From Chandan